PSL Litigation

The Austin Earned Sick Time Ordinance is unconstitutional because it is preempted by the Texas Minimum Wage Act (TMWA), the Texas Court of Appeals, Third District, ruled on Friday. A state district court judge earlier this year said that the challenge to the Austin PSL ordinance had “the aroma of a good political blood fight,”

The court’s ruling focused largely on whether the sick days required by the Austin ordinance were a “wage,” a term not defined in the TMWA. Relying on dictionary definitions to discern the “plain meaning” of that word, the court noted that the Austin Ordinance establishes a wage because it “increases the pay of those employees who use paid sick leave.”

The court explained that employees who use sick leave are paid a higher rate of pay for hours actually worked. For example, the court noted, an hourly employee earning $10 per hour who works 15 hours per week for 50 weeks (750 hours total) will have earned $7500 for that work. If that same employee uses the 25 hours of sick leave earned during that period under the Austin ordinance, the employee’s hourly wage for hours worked would increase to $10.33.

The court concluded that since “the Ordinance increases the pay of those employees who use paid sick leave,” it is a “wage” under the TMWA and, for that reason, is preempted by that state law.

The court’s decision comes just a few days after a Texas legislator pre-filed a bill to preempt local paid sick leave laws. My post on that pre-filing is here.

San Antonio is the only other Texas city to have enacted a PSL law. It is scheduled to be effective on August 1, 2019.

Paid Sick Leave Bills Introduced During Q3

None, though some introduced previously are still pending.

Paid Sick Leave Preemption Developments

Alabama: Marnika Lewis v. State of Alabama et al. (11th Cir) (Case No.17-11009)(11th Cir. July 25, 2018). The Alabama Uniform Minimum Wage and Right-to-Work Act bars municipalities from requiring employers to provide employees wages or “employment benefits,” including leave, unless required by federal or state law. It was passed the day after Birmingham increased the minimum wage within the city. The plaintiffs brought various race-based challenges to the Act, all of which were rejected by a federal district court last year. In July, the Eleventh Circuit affirmed the dismissal of all claims except the “equal protection” constitutional claim, holding that the plaintiffs have plausibly alleged both that the Act “burdens black citizens more than white ones” and that it was enacted with a discriminatory purpose. The court remanded that claim to the district court.

Pennsylvania: House Bill 861 prohibits a municipality from requiring “employer policies or practices,” which include paid or unpaid employee leave. The bill, which would negate Philadelphia’s paid leave law, was approved by the House Committee on Labor and Industry on October 1, 2018. Even if the bill were to be passed by the House and the Senate, Democratic Governor Tom Wolf has vowed to veto it. Republicans do not have the two-thirds majority in both legislative chambers necessary to override a veto.

Proposed federal bill: The Workflex in the 21st Century Act, introduced in the House of Representatives in November, 2017, would expand ERISA preemption to override the patchwork of paid sick leave laws for an employer which voluntarily adopts a written qualified flexible workplace arrangement” (QWFA) that provides the required minimum amount of “compensable leave” and offers employees at least one of the listed “workflex options.” The bill has been referred to U.S. House Committee on Education and the Workforce. A subcommittee held a hearing on the bill on July 24, 2018. The bill’s future is uncertain; support for it is mixed.

Paid Sick Leave Litigation

Challenges to state PSL laws

Massachusetts: The Railroad Unemployment Insurance Act (RUIA) preempts the Massachusetts Earned Sick Time Law (MESTL) in its entirety as it applies to interstate rail carriers, according to a decision in August by a Massachusetts federal district court on remand from the First Circuit. The First Circuit had held previously that the MESTL provision dealing with benefits for an employee’s own medical condition was preempted by the RUIA but remanded the case to have the district court decide whether any other sections of MESTL were preempted by the RUIA or the Railway Labor Act or ERISA and whether any sections of the MESTL can survive as applied to interstate rail carriers. CSX Transp. v. Healey, 861 F.3d 276 (1st Cir. 2017).

Massachusetts and Washington: The Massachusetts Earned Sick Time Law (MESTL) and Washington State Paid Sick Leave Act (WPSL) as applied to flight crew are unconstitutional and preempted by the federal Airline Deregulation Act (ADA), according to complaints filed by the Air Transport Association of America, an association of airline carriers. The plaintiff claims these state laws violate the dormant Commerce Clause–the implicit restriction on a state or local government’s ability to unreasonably burden interstate commerce–and the Fourteenth Amendment of the Constitution. The plaintiff also alleges that the Airline Deregulation Act (ADA) preempts the state PSL laws with regard to both flight crew and ground crew because they relate to a “price, route or service of an air carrier.” Air Transport Association of America, d/b/a Airlines For America v. Maura Healey in her capacity as Attorney General of the Commonwealth of Massachusetts (D.MA); Air Transport Association of America, d/b/a Airlines For America v. The Washington Dep’t of Labor and Industries et al (W.D. WA).

Challenges to local PSL laws

Pittsburgh, PA: The Supreme Court of Pennsylvania will decide whether Pittsburgh had authority to adopt the Sick Days Act, which it enacted three years ago. Last year, an appellate court affirmed a lower court’s decision that the city did not have the authority to enact it and invalidated the law. The appeal will focus on an interpretation of the Home Rule Charter Law, which limits the City’s authority to regulate business “except as expressly provided by statutes….” The briefing by the parties was completed on April 4, 2018. Pennsylvania Restaurant and Lodging Ass’n v. City of Pittsburgh and Service Employees Int’l Union, Local 32 BJ. (Pa. Supreme Court, 227 WAL 2017).

Austin, TX: A cadre of business interests had sued to enjoin implementation of the Austin Earned Sick Time Ordinance, which is scheduled to go into effect on October 1, 2018. The plaintiffs claim that the Austin Ordinance is preempted by the Texas Minimum Wage Law which requires employers to follow the federal minimum wage law, which does not require employers to pay for time not worked as the Austin PSL ordinance does; violates the due process clause of the state constitution; and violates the state constitution’s equal protection clause because it allows employers and unions to modify the yearly cap in their labor contracts but does not afford non-union employers the right to modify the cap. Noting that the case “has the aroma of a good political blood fight,” a state district court judge denied the injunction request. On appeal, the Texas Court of Appeals in August reversed that decision and enjoined the implementation of the Ordinance to maintain the status quo while the legal challenge proceeded. The City of Austin is appealing the order enjoining the implementation of its Earned Sick Time Ordinance to the state Supreme Court, according to a news report. Texas Ass’n of Business et al v City of Austin, Texas et al (TX Ct of Appeals, Third District, August 17, 2018).

Other Paid Sick Leave Developments To Watch

Albany County, NY: The County’s Paid Sick Leave Act was introduced in March, referred to the Legislature’s Law Committee and has been wending its way through the legislative process. A hearing on an amended bill will likely occur in late October.

Cook County Earned Sick Leave Ordinance: The County Board of Supervisors have decided to include an advisory referendum question on the November 6, 2018 ballot to ask voters in municipalities that had opted out of the Cook County Earned Sick Leave Ordinance whether their municipality should “match the Cook County earned sick time law which allows for workers to earn up to 40 hours (5 days) of sick time a year to take care of their own health or a family member’s health?” More than 80% of the municipalities within Cook County had opted out of the County PSL ordinance.

Westchester County, NY: The Westchester County Board of Legislators passed an Earned Sick Leave Law on October 1, 2018. The bill awaits the County Executive’s signature. The bill has the typical PSL architecture: employees will accrue one hour of sick time for every 30 hours worked and may earn and use up to 40 hours in a year for itemized reasons. For employees of employers with at least 5 employees, the earned time is paid.

In 2015, a railroad sued the Massachusetts Attorney General, arguing that the MESTL was preempted by three laws as it applied to interstate rail carriers: the RUIA, the Railway Labor Act and ERISA. The parties agreed that the court would address the RUIA argument initially. In 2016, the federal district court agreed that “RUIA preempt[s] all state laws, including the [Earned Sick Time Law] that relate to sickness benefits for railroad workers.” CSX Transportation, Inc. v. Healey (D. MA, July 13, 2016).

On appeal, the First Circuit held that the MESTL provision dealing with benefits for an employee’s own medical condition was preempted by the RUIA but remanded the case to have the district court decide whether any other sections of MESTL were preempted by the RUIA or the Railway Labor Act or ERISA and whether any sections of the MESTL can survive as applied to interstate rail carriers. CSX Transp. v. Healey, 861 F.3d 276, 284 (1st Cir. 2017).

On remand, the district court concluded once again that “Congress intended RUIA to serve as the ‘exclusive’ source of all sickness benefits for railroad employees and to preclude the employees from claiming rights to sickness benefits under any state sickness law.” The fact that MESTL allows time off for reasons other than the employee’s own sickness does not change the result, the court said. “In short, the breadth of the state law does not save it from RUIA preemption. Such a reading would allow a state to legislate creatively around the RUIA and thereby thwart the objective of Congress to create a uniform federal scheme of sickness benefits for railroad workers.”

Similar preemption challenges brought by an airline industry group to the Washington and Massachusetts PSL laws are pending.

With a GOP trifecta–the governor is a Republican and both chambers of the legislature have a Republican majority–one would not expect much PSL activity in Texas. But PSL turbulence continues in the Lone Star State and was on full display last week.

Last Friday, a Texas Court of Appeals enjoined the implementation of the Austin Earned Sick Time Ordinance pending the outcome of the legal challenge to it. The Austin Ordinance had been scheduled to go into effect on October 1, 2018. In reversing last month’s district court decision, the Court said that “enjoining the ordinance is necessary to preserve the parties’rights until disposition of the appeal.”

In San Antonio, PSL proponents had collected enough signatures to have voters decide in November whether to adopt a PSL ordinance. On Thursday, the San Antonio City Council passed the PSL proposal, nullifying the ballot initiative. The San Antonio PSL ordinance is scheduled to go into effect on August 1, 2019.

Here is where the GOP trifecta is a factor. The Texas Legislature convenes in January 2019. It is widely anticipated that the legislature will consider a bill to prohibit political subdivisions from enacting a leave law. If enacted, such a law would likely negate both the Austin and San Antonio ordinances.

I suspect that San Antonio business interests are huddling this week to decide whether to file a challenge similar to that pending in Austin or sit on the sidelines and hope that the Austin ordinance (and, in turn, the San Antonio ordinance) will be negated by either the court or the legislature.

The challenge to Alabama’s preemption law lives to fight another day, according to an Eleventh Circuit Court of Appeals decision last week. In 2016, the plaintiffs made various race-based challenges to the Alabama Uniform Minimum Wage and Right-to-Work Act. That Act bars political subdivisions from requiring employers to provide employees with wages or “employment benefits,” including paid and unpaid leave, not required by federal or state law. The Alabama legislature enacted the law the day after the City of Birmingham’s passed an ordinance increasing the minimum wage within the city. The state law voided that ordinance. The plaintiffs argued that the state law was unconstitutional and violated the Voting Rights Act. The defendants asked the court to dismiss the lawsuit.

Last year, a federal district court rejected all of the plaintiffs’ challenges and dismissed the case. The Eleventh Circuit last week affirmed the dismissal of all but one of the challenges. Concerning the plaintiffs “equal protection” constitutional claim, the Eleventh Circuit held that the plaintiffs have plausibly alleged both that the MWA “burdens black citizens more than white ones” and that it was enacted with a discriminatory purpose. The court remanded the equal protection claim to the district court for further proceedings.

Paid Sick Leave Laws Effective in Q2

New York City (amendment): New York City amended its Earned Sick Time Act to allow accrued time to be used for reasons related to domestic violence. The renamed New York City Safe and Sick Time Law was effective May 7, 2018.

Paid Sick Leave Laws Effective After Q2

Paid Sick Leave Bills Introduced During Q2

None, though some introduced previously are still pending.

Paid Sick Leave Preemption Developments

Alabama: Marnika Lewis v. State of Alabama et al. (11th Cir) (Case No.17-11009). Last year, a federal district court rejected challenges to the Alabama Uniform Minimum Wage and Right-to-Work Act, which bars political subdivisions from requiring employers to provide employees with wages or “employment benefits, ”including paid and unpaid leave, not required by federal or state law. The plaintiffs have appealed to the U.S. Court of Appeals for the Eleventh Circuit, which heard oral argument on April 13, 2018.

New Jersey: The New Jersey Earned Sick Leave Law preempts the existing 13 municipal PSL laws within the state as well as any future local earned sick leave laws. The state law is effective October 29, 2018, at which time the 13 municipal laws will meet their demise, which will reduce by about a third the number of PSL laws nationwide.

Proposed federal bill: The Workflex in the 21st Century Act, introduced in the House of Representatives in November, would expand ERISA preemption to override the patchwork of paid sick leave laws for an employer which voluntarily adopts a written qualified flexible workplace arrangement” (QWFA) that provides the required minimum amount of “compensable leave” and offers employees at least one of the listed “workflex options.” The bill has been referred to U.S. House Committee on Education and the Workforce, which held a hearing on the bill on July 24, 2018.

Paid Sick Leave Litigation

Challenges to state PSL laws

Massachusetts: A railroad had argued that the Massachusetts Earned Sick Time Law (MESTL) was preempted by the Railroad Unemployment Insurance Act (RUIA), the Railway Labor Act and ERISA with regard to interstate rail carriers. The First Circuit held last June that the section of the MESTL dealing with benefits for an employee’s own medical condition was preempted by the RUIA. The court remanded the case to have the district court decide whether any other sections are preempted by the RUIA or the Railway Labor Act or ERISA and whether any sections of the MESTL survive as applied to interstate rail carriers. CSX Transportation, Inc. v. Healey (1st Cir. 2017).

Massachusetts and Washington: The Massachusetts Earned Sick Time Law (MESTL) and Washington State Paid Sick Leave Act (WPSL) as applied to flight crew are unconstitutional and preempted by the federal Airline Deregulation Act (ADA), according to complaints filed by the Air Transport Association of America, an association of airline carriers. The plaintiff claims these state laws violate the dormant Commerce Clause and the Fourteenth Amendment of the Constitution. The dormant Commerce Clause is an implicit restriction on the ability of state and local governments to impose an unreasonable burden on interstate commerce. The plaintiff also alleges that the Airline Deregulation Act (ADA) preempts the state PSL laws with regard to both flight crew and ground crew because they relate to a “price, route or service of an air carrier.” Air Transport Association of America, d/b/a Airlines For America v. Maura Healey in her capacity as Attorney General of the Commonwealth of Massachusetts (D.MA); Air Transport Association of America, d/b/a Airlines For America v. The Washington Dep’t of Labor and Industries et al (W.D. WA).

Challenges to local PSL laws

Pittsburgh, PA: The Supreme Court of Pennsylvania will decide whether the City of Pittsburgh had authority to enact the Sick Days Act, which it enacted in August 2015. Last year, an appellate court affirmed a lower court’s decision that the city did not have the authority to enact it and invalidated the Act. The lone dissenting judge said that Pittsburgh had the right to protect the health and safety of its residents and that the Sick Days Act was an exercise of that right. The appeal will focus on an interpretation of the Home Rule Charter Law, which limits the City’s authority to regulate business “except as expressly provided by statutes….” The briefing by the parties was completed on April 4, 2018. Pennsylvania Restaurant and Lodging Ass’n v. City of Pittsburgh and Service Employees Int’l Union, Local 32 BJ. (Pa. Supreme Court, 227 WAL 2017).

Austin, TX: A cadre of business interests had sued to enjoin implementation of the Austin Earned Sick Time Ordinance, which is scheduled to go into effect on October 1, 2018. Noting that the case “has the aroma of a good political blood fight,” a state district court judge denied the injunction request. However, the plaintiffs might appeal the district judge’s decision or proceed to litigate the substance of their claims. The plaintiffs claim that the Austin Ordinance is preempted by the Texas Minimum Wage Law which requires employers to follow the federal minimum wage law, which does not require employers to pay for time not worked as the Austin PSL ordinance does. They also claim the ordinance violates the due process clause of the state constitution because the “articulated governmental interests are factually unsupported,” “…its mandates “have no rational connection to furthering those interests” and even if they did, the mandates are “so burdensome as to be oppressive in light of the alleged governmental interest.” They also argue that the Ordinance violates the state constitution’s equal protection clause because it allows employers and unions to modify the yearly cap in their labor contracts but does not afford non-union employers the right to modify the cap. Texas Ass’n of Business et al v City of Austin, Texas et al (D.Ct. Travis County 2018).

Other Paid Sick Leave Developments To Watch

Albany County, NY: The County’s Paid Sick Leave Act was introduced in March and referred to the Legislature’s Law Committee. The Albany bill has the typical PSL architecture: employees accrue one hour of paid leave for every 30 hours worked, to an annual maximum of 72 hours for employers with at least ten employees, lesser and phased-in amounts for smaller employers except that employers with five or fewer employees would provide unpaid leave. The Law Committee is scheduled to consider the bill at a July 23, 2018 meeting.

Cook County Earned Sick Leave Ordinance: Two Cook County municipalities that had previously voted to opt out of the County’s PSL ordinance revisited their decisions. In April, Western Springs opted in to the County PSL ordinance; Wilmette Village again voted to opt out of the County PSL ordinance.

Dallas and San Antonio, TX: PSL proponents in both cities have collected signatures to put the initiative on the November 2018 ballot. In Dallas, PSL proponents submitted what they believed were a sufficient number of signatures to support the ballot initiative but city officials said recently that the number of valid signatures is 871 fewer than required. In San Antonio, PSL supporters also submitted what they believed were sufficient valid signatures to support the PSL ballot initiative. The next step is for the City Council to decide whether to officially certify the issue for a ballot initiative.

Michigan: PSL proponents in Michigan have submitted what they believe are sufficient signatures to have voters decide in November whether to adopt a PSL law. Two business groups have filed challenges with the Board of State Canvassers concerning both the substance of the proposed ballot initiative and the validity of some signatures.

Westchester County, NY: The Westchester County Board of Legislators is considering a PSL bill that is substantially similar to the bill introduced but not passed last year. The proposed Earned Sick Leave Law has the typical PSL architecture: employees will accrue one hour of sick time for every 30 hours worked and may earn and use up to 40 hours in a year for itemized reasons. For employees of employers with at least 5 employees, the earned time is paid. A public hearing has been set for September 17, 2018 at 7:30 p.m.

On Labor Day 2015, then-President Obama signed Executive Order 13706, Establishing Paid Sick Leave for Federal Contractors, which requires certain government contractors to provide certain employees with paid sick leave. The EO applies to certain government contractors who enter into certain government contracts after January 1, 2017. While there has been speculation about the plight of EO 13706 in the Trump administration, no steps have yet been taken to negate it and, unless and until it is voided, the EO is in effect.

In Dallas, PSL proponents submitted to city officials what they believed were sufficient signatures to allow voters to decide in November whether to adopt a PSL ordinance. Their challenge grew yesterday when city officials said, according to a news report, that the number of valid signatures was 871 signatures fewer than the required number.

PSL proponents in San Antonio also submitted what they believe are more than enough signatures to put PSL on the ballot in November. The city clerk must inform the City Council whether sufficient valid signatures have been submitted. If so, the City Council could choose to enact the PSL ordinance rather than send it to the voters. The next Council meeting is August 2.

In Austin, in April, a cadre of business interests sued to enjoin the implementation of the Austin Earned Sick Time Ordinance, which is effective in October. Noting that the case “has the aroma of a good political blood fight,” a state district court judge last month denied the injunction request, according to a news report. The denial does not end the litigation. The plaintiffs might appeal the district judge’s decision or proceed to litigate the substance of their claims.

The threat of state preemption of local PSL ordinances taints all of these PSL efforts. In the Austin case, the Texas Attorney General has intervened to argue that the Austin ordinance is preempted by the state’s minimum wage law. He has also written to San Antonio officials to inform them that they do not have authority to enact a PSL law, whether by ballot initiative or the legislative process, according to a local report. Even if state law now does not preempt local PSL laws, there is concern that the Texas Legislature will enact a law preempting local PSL ordinances when it convenes next year. Texas preemption laws have recently banned local ride-share regulations, plastic ban bans, fracking bans and sanctuary city ordinances.